A staggering trade deficit of $51 billion with China has prompted the government to conduct a study on the impact of Chinese imports and the extent to which they have displaced domestic production.

The commerce ministry will also seek to identify Chinese products that can be substituted competitively by domestic products through this in-depth study for the period between 2007-08 and 2016-17.

There will be specific emphasis in the study on sectors like steel, urea and other chemicals including pharmaceuticals, electronics, telecom and consumer products of mass consumption.

The study will estimate the impact of Chinese imports on employment generation, an official aware of the development said, adding that the government will hire an external consultant to do the analysis.

Last week, the European Union ruled to check excessively cheap imports, as it flagged China for special attention, reasoning its economy is distorted by the state. It could mean more anti-dumping action against Chinese imports into the European Union.

This would encourage other countries as well to take action against very cheap Chinese goods that have flooded their markets. Among developing countries, India's trade with China has witnessed a steep rise with bilateral trade increasing to $71.4 billion in 2016-17 from $70.7 billion in 2015-16 and China replacing the US as the biggest trade partner of India.